In California, Accounting Gone Awry

''This was a matter of not thinking through the consequences of two different departments having different accounting structures,'' says the head of the state Department of Mental Health.Stephen Taub and Dave Cook, CFO.com | USMarch 13, 2007

Accounting-related problems at California's Department of Mental Health have cost the state about $300 million, reported the Los Angeles Times.

The department's $1 billion Early, Periodic Screening and Treatment Program has come up short by tens of millions of dollars because some of its money had been appropriated for other uses under a new accounting practice. The department also acknowledged that it drastically underestimated the number of families it would serve this year, and that it must repay the federal government after double-billing for some services.

"It is extremely disturbing," said state senator Elaine Alquist, chairwoman of a committee that oversees mental-health spending, according to the Times. "There are a lot of things here that seem to have gone awry. ... There is another way to put this, but I am a lady, and I will keep my comments in that vein."

The mental-health services are provided by the counties, which are reimbursed by the state, according to the newspaper. Stephen Mayberg, director of the Mental Health Department, explained that county officials did not realize that a new "use it or lose it" policy had taken effect after the merger of two agencies. Under the policy, any money not spent by the counties at the end of the fiscal year, last June, would be funneled into the state's general budget and used for other purposes.

"Sometimes there are just unintended consequences to good government," Mayberg reportedly said. "This was a matter of not thinking through the consequences of two different departments having different accounting structures."

As for the overbilling, Mayberg stated that the state department had not yet spent the funds in question and was in the process of repaying the money to Washington. Even so, Mayberg conceded, a federal audit could result in major fines for the state.

The Times also reported that the state Department of Finance has conducted its own audit and identified several areas where accounting procedures for mental health spending can be improved. "We think the department has put the necessary procedures in place to prevent this from happening again," said spokesman H.D. Palmer.